Correlation Between Franklin High and Thornburg Intermediate
Can any of the company-specific risk be diversified away by investing in both Franklin High and Thornburg Intermediate at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Franklin High and Thornburg Intermediate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin High Yield and Thornburg Intermediate Municipal, you can compare the effects of market volatilities on Franklin High and Thornburg Intermediate and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Franklin High with a short position of Thornburg Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin High and Thornburg Intermediate.
Diversification Opportunities for Franklin High and Thornburg Intermediate
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Franklin and Thornburg is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Franklin High Yield and Thornburg Intermediate Municip in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg Intermediate and Franklin High is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Franklin High Yield are associated (or correlated) with Thornburg Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg Intermediate has no effect on the direction of Franklin High i.e., Franklin High and Thornburg Intermediate go up and down completely randomly.
Pair Corralation between Franklin High and Thornburg Intermediate
Assuming the 90 days horizon Franklin High Yield is expected to generate 1.57 times more return on investment than Thornburg Intermediate. However, Franklin High is 1.57 times more volatile than Thornburg Intermediate Municipal. It trades about 0.17 of its potential returns per unit of risk. Thornburg Intermediate Municipal is currently generating about 0.18 per unit of risk. If you would invest 906.00 in Franklin High Yield on September 4, 2024 and sell it today you would earn a total of 11.00 from holding Franklin High Yield or generate 1.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
Franklin High Yield vs. Thornburg Intermediate Municip
Performance |
| Timeline |
| Franklin High Yield |
| Thornburg Intermediate |
Franklin High and Thornburg Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin High and Thornburg Intermediate
The main advantage of trading using opposite Franklin High and Thornburg Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin High position performs unexpectedly, Thornburg Intermediate can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Thornburg Intermediate will offset losses from the drop in Thornburg Intermediate's long position.| Franklin High vs. Franklin Mutual Beacon | Franklin High vs. Templeton Developing Markets | Franklin High vs. Franklin Mutual Global | Franklin High vs. Franklin Mutual Global |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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